Opening Bell: 5.17.06

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Indiana Tries to Be First in Line for a New Honda Plant (NYT)
The Asian automakers still haven't gotten the memo about the decline of the American manufacturing base. Don't they realize that labor is inherently too expensive here to build cars? Shouldn't they be moving their design teams to lower Manhattan and their factories to Mexico? That being said, if you're interested in testing your econ. skills over your lunchbreak, here's a little quiz: if you want to support the "US economy" is it better to buy a Mexican-made car from a company that employs a lot of Americans (e.g. GM) or an American-made car from a company that employs mainly people in Japan (e.g. Toyota)? We found this question here last week; put your answer in the comments.
Bausch & Lomb, Securities Fraud, and Director Liability (The Conglomerate)
Well, it wasn't hard to see this coming. America's finest regulatory agencies are turning the screws on Bausch & Lomb over the spiraling problems of ReNu with MoistureLoc. The FDA is claiming the company was tardy about disclosing problems, while questions are emerging that will interest the SEC. Just so you have a heads up on the issues involved (and because you'll never get the facts from the press, which will be fascinated mainly by the fungus), Law Prof Elizabeth Nowicki notes some interesting facts. One is that RiteAid and Target both sell generic solution, which might just be repackaged Bausch & Lomb stuff. If so, could they get ensnared in this? Also, there was already a lawsuit last year from a woman who claimed that she needed a corneal transplant after using ReNu with MoistureLoc, so there are some big questions looming over all the timing of what Bausch knew and when. Stay tuned.
Hewlett-Packard Shares Rise as Profit Beats Analysts' Estimates (Bloomberg)
HP continues to make the case that it's actually taking major shots at Dell. What's not clear is why. All of the sudden, people are touting the retail model, saying that it's more convenient for people to go just get a cheap PC from a nearby electronics shop than it is to buy a computer online, and wait a few days for it to be customized and delivered -- but again, what changed in the PC industry that people stopped caring about customization? Have PCs just become affordable enough for most people that they don't have to spend much time tweaking features and making tradeoffs that optimize the box for their tastes? Or are people more concerned about design than they are guts? HPs do look a little nicer than Dells. Who saw AMD and HP both starting to cruise against their more dominant rivals?
Music Labels Sue XM Over Recording Device (Washington Post)
You may not realize it now, but the record labels are dead. Sure, they're still making a lot of money, and they've got vaults and vaults of great stuff that they'll be able to sell for sometime (maybe), but they've ceased having any economic function. Their corporate strategy is to do whatever the lawyers tell them to do, whereas it should be the exact opposite. As internet distribution takes hold, their business of selling CDs is toast, while efficient mechanisms for word-of-mouth to spread will make their ability to promote artists irrelevant. They're suing everyone in sight, like the drunk guy at a bar who is convinced that everyone around him is a drunk asshole; they want $150,000 for every song that a user recorded to a device, which means they're not just drunk, they're high. Sort of ugly to see such a public meltdown.


Jury resisting manipulation, consultant says (Houston Chronicle)
A jury consultant is sure that the jury is focusing on the facts, and not simply the broad themes and rhetoric. How on earth she knows this is beyond our comprehension, though her statements are no less consequential than most of the reporting in this case.
GM Shares Looking Like a Call Option on Survival (Bloomberg)
Meme watch! This is the new description of risky stocks, that they're really just call options in disguise. It's been said about XMSR and SIRI as well, and of course it means that there's the likely scenario (which is trouble) and the unlikely scenario (which is fabulosr riches). The payoff matrix is asymmetrical, like many call options or other leveraged bets. It's probably a good description, really, people should think about stocks more probabilistically, and thinking of them as options with a wide variety of outcomes is a good way to do it.
Creative Technology Takes on Apple (BusinessWeek)
The originator of the mp3 player industry is taking on the also ran, of course in this case the "also ran" is Apple, who is now crushing the first mover, Creative. And perhaps the headline "Creative Technology Takes On..." is a little misleading. They're not doing any taking on in the traditional market sense, you know, old-fashioned stuff like beating Apple. Instead they're taking the new nu-fashioned approach, suing the company for infringing on some interface patent. This might be tolerable if it weren't so blatantly and transparently desperate. Why did they wait years after the iPod's release to claim there is a similarity? And why should a company even have exclusivity over the interface on an mp3 player? Pathetic.
Wholesale Prices and Housing Data Cool Inflation Worry (NYT)
The latest data will either make you more or less worried about inflation, depending on what camp you're in on the core vs. non-core debate. Is it more accurate to exclude (ever so volatile) food and energy components of the CPI & PPI, or are they just as much a part of the inflation picture as everything else is, like sweet buns and pocket calculators. First of all, is food really that volatile? Yes, oil jumps around a lot (though it seems like people often confuse high for volatile), but do cornflakes? The question should be tackled in two parts -- 1) Do you think that inflation is a monetary phenomenon? If yes (and smart people will answer yes) then 2) Are the high commodity prices a function of overly liberal monetary policy, i.e. rate cuts? If yes, then you should include core. But if you think that the sustained rise in global commodity prices is fueled by some other factors (Chinese growth, inherent supply shortages, etc.), then it's reasonable to say that they should be excluded.
Research fraud rampant in China (CS Monitor)
This fits into a class of story that we've been seeing a lot lately: bad news that for some reason will make Americans feel relieved. The Christian Science Monitor reports the staggering statistic that some 60% of Ph.D. holders admit to have engaged in plagiarism or bribery on their way to get their degree. Now there's nothing good about having fewer advanced researchers in the world, but for all of the hand wringing about how China is dominating the US on the research front, people may take some relief that there may be some weak foundations to the strength. The article reports on a small study, of only 180 Ph.D. holders, but it's still disturbing. All that being said, when academic corruption becomes a big problem in a society, it means they're doing pretty well.

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